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USDCHF Analysis. USDCHFs bounce from 0.9088 extended to as high as 0.9228. Further rise to test 0.9262 key resistance is expected later today, a break above this level will indicate that the downtrend from 0.9594 had completed at 0.9088 already, then the following upward movement could bring price back towards 0.9594 previous high. However, as long as 0.9262 resistance holds, the price action in the range between 0.9088 and 0.9262 is treated as consolidation of downtrend from 0.9594, and one more fall to 0.9000 is still possible.

USDCAD Analysis. USDCAD may be forming a cycle top at 1.0038 on 4-hour chart. Range trading between 0.9925 and 1.0038 would likely be seen in a couple of days. As long as 1.0038 resistance holds, the sideways move in the range is treated as consolidation of downtrend from 1.0318, and one more fall to 0.9800 is still possible.

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Sterling remains steady after BoE did what markets expected, keeping rates unchanged at 0.5% and raised the size of the asset purchase program by GBP 50b to GBP 325b as “more likely than not that inflation would undershoot the 2% target in the medium term”. In the accompanying statement, the bank noted that UK’s recovery has slowed during 2011with slight contraction in Q4. The bank acknowledged recent improvement in business surveys but pointed to slowdown in Eurozone’s market. The banks expected that with continued monetary stimulus, UK output growth will strengthen later this year. Regarding inflation, the bank expect CPI to “fall sharply” in near term as January 2011 drops out of the twelve-month comparison. Also contribution to moderation in inflation are energy price while “unemployment and spare capacity continues to restrain domestically generated inflation.”

Released earlier today, UK industrial production rose more than expected by 0.5% mom in December while manufacturing production rose 1.0% mom. Visible trade deficit narrowed much more than expected to GBP -7.1b in December, hitting a 22-month low.

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EURUSD Forecast The EURUSD continued its bullish momentum yesterday topped at 1.3051 and closed at 1.3023. There are no changes in my technical outlook. Price is still in a strong bullish correction phase, slipped above the 200-4 hour-EMA. Immediate resistance, which is also the nearest bullish target is seen around 1.3100/60. Immediate support is seen around 1.2950. A clear break below that area could lead price to neutral zone in nearest term testing 1.2875 but only a clear break and daily close below 1.2800 could end the current strong bullish view.

“It took me several years to become consistently profitable. I had the great misfortune of making a lot of money quickly and thinking that I knew what I was doing. I did not. I lost all the money I had made and a lot more before I realized I had no clue.”   – Tom Alexander Hello:  If you want to play the markets triumphantly, you need to determine the direction of the trade based on the overall trend. Then you need to determine the best location for the entry and the stop.  You must not make a trade that does not meet your exact entry criteria: you require rock-solid discipline to achieve this. You ought to compute the exact amount of risk; the position sizing, safety measures and the target. Trades should not be taken without seriously considering safety measures. Make certain that you are trading the best opportunity available; something that requires more work, some charts to view, etc., but it forces the trader to be more selective, which is very important to long term success. Below is the summary of some of my trading activities this week. AUDUSDPrimary Trend: BullishThe AUDUSD is precariously bullish, which means that the present outlook may be short-lived. A great resi Read more…

Risk FX tumbled lower in early North American dealing after US GDP data for Q3 was revised lower to 1.8% from 2.0% initially forecast. The primary reason for the downward revision was the sharp decline in personal consumption expenditure which accounts for 70% of the US economy. Economists had projected an increase of 2.3% while actual figure came in at 1.7%.

The tepid pace of PCE indicates that the US consumer remains exceedingly cautious  in his spending habits given the challenging employment conditions  and the  moribund state of the housing market. Analysts expect that Q4 of this year will show an improvement in consumption to 3% as labor conditions ease. Indeed today’s weekly jobless claims printed at 364K versus 368K a week ago – the third consecutive time that they have been markedly better than expected.

Still, it remains unclear if consumers will dramatically increase their pace of spending in Q4 of this year. One unexpected factor that could depress sales has been the unusually warm weather in  Northeastern US which has forced retailers to discount merchandise prematurely.

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Did European Union leaders make the sovereign debt crisis “go away” last week?

Not even close. What they did agree on is tougher budget rules:

“…17 countries of the euro zone…agreed to run only minimal budget deficits in the future and allowed the European Court of Justice the right to strike down national laws that don’t enforce such discipline properly…” Wall Street Journal,

Will the EU agreement prove bullish or bearish for world stock markets, including the Dow Industrials?

Let’s put it this way: The evidence suggests that government intervention in the economy does not alter the dominant trend of financial markets.

For example: Look at the DJIA chart and try to identify when the U.S. government bailed out Fannie Mae, Freddie Mac, and other financial institutions.

“[The chart below] shows that in fact these actions took place in the early portion of the biggest stock market decline in 76 years. These act

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Euro spiked higher earlier today on report that China is going to create a $300b investment vehicle for managing investment funds in US and Europe. However, markets are rather unimpressed by the fiscal compact agreed by 23 of EU nations, not all 27 nations. And in such case, the new rules will only operate as intergovernmental agreements and couldn’t be enforced through change of treaty. The rest of the nations, except UK, would consult their parliaments before confirming whether to join the agreement. But UK has made it clear that they won’t join as there was “fundamental disagreement”. And still, every single country will need to take the issue back to parliament s for approval. Under the pact, the Eurozone member states, plus six other EU states, agreed to run minimal budget deficits and allow European Court of Justice the right to strike down national law that don’t enforce the discipline.

Meanwhile, EU President Van Rompuy announced that the approach to private sector involvement is “now officially over”. Germany backed down from insisting on investors sharing the costs of bailout.

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The EURUSD attempted to push higher this week, topped at 1.3536 but closed lower at 1.3391. While weekly and monthly chart don’t give us much clue, daily and h4 chart still suggest a bearish outlook. Price is still in a bullish correction phase since bounced from 1.3211 last week, moving inside a bullish channel as you can see on my h4 chart below but formed a double top formation (1.3520/30) and fell back below 1.3420 support area after the NFP on Friday. For the upcoming week, 1.3520/30 and the EMA 200 should be important resistance to be closely watched. A clear break and daily close above that area could continue the bullish correction testing 1.3613 even higher. On the downside, a clear break below the bullish channel and 1.3300 – 1.3270 support area could end the bullish correction phase testing 1.3145 even lower.

Have a great weekend and see you guys next week.

The EUR/USD soared at the start of North American trade on reports that Germany may be ready to lend to the IMF which would then provide those funds to the ECB so the central bank  could use the capital to support the region’s struggling sovereign debt markets. According to reports, if a consensus is reached, a deal could be struck as early as the EU summit on December 8th.

Although this speculation is far from confirmed, the IMF/ECB deal would be able to sidestep many of the structural impediments that have prevented the EZ authorities from acting more assertively so far as the credit crisis continues to spin out of control. Most importantly such a a deal would avoid the political risk of trying to amend the EU treaty which would not only prove problematic but may also take a considerable amount of time. Th

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